A tale of two managers, Warren Buffet and Arsene Wenger

First one has to define what a Manager does. Peter Drucker defined a manager’s role into 5 categories:

Sets objectives. The manager sets goals for the group, and decides what work needs to be done to meet those goals.

Organizes. The manager divides the work into manageable activities, and selects people to accomplish the tasks that need to be done.

Motivates and communicates. The manager creates a team out of his people, through decisions on pay, placement, promotion, and through his communications with the team. Drucker also referred to this as the “integrating” function of the manager.

Develops people. With the rise of the knowledge worker, this task has taken on added importance. In a knowledge economy, people are the company’s most important asset, and it is up to the manager to develop that asset.

This is a concise summary and yet it seems like a lot of responsibility but the strength of the individual is dependent on how his team share that responsibility.

One thing that Drucker failed to point out is that a manager also needs to be able to report to and communicate with owners, members of the board and society as a whole. This task is often overlooked and understated and yet it is crucial for the businesses survival and public image.

The Great Value investors

I have chosen Buffet and Wenger as examples as I believe them to be extraordinary managers in their respective fields. The reason for this is that they constantly strive to find value in their respective fields. Their dedication and discipline when looking for undervalued assets and to sell potentially overvalued ones or ones that disrupt the status quo sets them apart from other managers. They both have only splashed out for the highest quality assets and even then sought to buy them at an opportune moment.

They have built strong support staff and planned succession protocols should the unknown happen and therefore have a good appreciation of risk management. They have motivated varying personalities to push towards the same goals and hold high standards hence achieving good results.

Less publicized is the fact that it takes time to build strong teams. Neither was successful immediately and both have had peaks and troughs throughout their careers.

However they have also learnt over time that the softer skills of public relations and humility when things don’t work out as planned can be powerful tools.

Whether dealing with investors or football fans the overall judgment of a manager’s ability will be based purely on success. The social media/software world especially is full of short term success stories: Facebook, Twitter, Ebay, Tencent etc. whereas managers at Paulson & Co. I’m sure amongst many others will have learnt that fast growth is less sustainable.

Long term success is harder and needs to be built on solid foundations. Take time to build and train your team, it will be worth it in the end.

N.B. BSP aims to be independent so for full disclosure the Founding Partner of BSP is an avid Arsenal fan and shareholder so the article may be biased. Some people may ask why Sir Alex Fergusson wasn’t used as an example, but one could argue that Sir Alex is a fantastic team builder gets the best from his teams but less of a value investor. We would have also had to use a fund manager with a shorter fuse and less academic persona for fair comparison.